WTI Extends Gains After API Reports Surprise Crude Draw

WTI Extends Gains After API Reports Surprise Crude Draw

Oil jumped today on speculation that the Biden administration may pull the plug on any plans to release crude from the nation’s emergency reserves after a U.S. energy report showed supplies rising next year.

“The market is clearly looking at this STEO report and determining that odds of a coordinated SPR release are shrinking,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

“However, there is a political element to this issue and prices at the pump remain very high, so I would not discount this chance of SPR release entirely on this report.”

WTI rallied for a third straight day as some analysts pointed out that talk of a potential release of crude from the U.S. Strategic Petroleum Reserve highlights a shortage of crude supplies.

An SPR release would be a “short-term measure at best,” since any inventory drawn from the reserve would have to eventually be replenished, Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch.

Oil prices may even rise in response to an SPR release, he said, as the move “will be seen as a desperate attempt that highlights the acute shortage of oil.”

For now, all eyes will be on Cushing (stocks near lower operating limits) and Crude (to see if the builds are continuing).

API

Crude -2.485mm (+1.6mm exp)

Cushing

Gasoline -552k (-1.2mm exp)

Distillates +573k (-1.1mm exp)

API reported an unexpected crude draw during the prior week…

Source: Bloomberg

WTI was hovering around $84.25 ahead of the print and pushed modestly higher after the surprise draw…

At the end of the day, a White House official said on Tuesday afternoon that the administration reviewed the EIA forecast and welcomes news of moderating prices (the report forecasts U.S. benchmark crude will fall below $80 a barrel by December and reach as low as $62 by the end of next year).

But, demand has already jumped back to pre-pandemic levels and is poised to go even higher early next year, said Russell Hardy, the chief executive officer of Vitol Group said. Hardy said market supply and demand is “going to be reasonably tight” for the next 12 months and a price spike to $100 a barrel is “certainly a possibility.”

Tyler Durden
Tue, 11/09/2021 – 16:37

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